Former European Commissioner Mario Monti has won the backing of Italy’s centre right and centre left parties to form government following Prime Minister Silvio Berlusconi’s resignation.
Photo: Reuters

Former European Central Bank vice president Lucas Papademos was sworn in as Greece’s new Prime minister on November 11 and faces the challenge of securing €130 billion in loans to stave off default.
Photo: AFP

A televison reading “breaking news” shows Italian Prime Minister Silvio Berlusconi addressing the nation the day after he resigned on November 13 in Rome.
Photo: AFP

French President Nicolas Sarkozy has said Greece needs to act quickly on the terms of a €130 billion bailout deal struck in October.
Photo: AFP

German Chancellor Angela Merkel’s government has reportedly worked out contingency plans in the event Greece must quit the euro.
Photo: Reuters

Greek Finance Minister Evangelos Venizelos says the country will implement debt measures agreed in October “no later than Monday or Tuesday”.
Photo: AFP

The euro zone will brace today for the judgment of the markets after a dramatic weekend in which Greece and Italy installed unelected technocratic prime ministers to try to save the single currency.

Italian prime minister Silvio Berlusconi resigned after dominating the political scene for 17 years, handing over to the economist and euro-bureaucrat Mario Monti, who has successfully negotiated with Italy’s main political parties to form government.

In Greece Lucas Papademos, a former vice-president of the European Central Bank, was named Prime Minister, with a mission to secure €130 billion ($174 billion) in loans to stave off default.

Markets had earlier responded positively as news spread that Europe might end the week-long political crisis that has brought the euro to the verge of disintegration and threatened to spread recession across Europe and further weaken global markets.Channel 4 Monti

Italy’s has asked technocrat Mario Monti to form a new Italian government.

The departure of Mr Berlusconi could end a remarkable political career heading four separate governments, which has been marked by tax avoidance, sex scandals and a flamboyant style.

MONTI TO WORK QUICKLY TO FORM GOVERNMENT

Monti, who has now won the backing of both Mr Berlusconi’s centre right and the opposition centre left, consulted with the parties on the shape and program of his government before announcing on Monday morning AEDT that he would work quickly to form a new government.

Over the weekend Monti held talks both with Italian political parties and with the head of the European Central Bank, Mario Draghi, and euro zone officials.

Monti told reporters in Rome he will carry out the task of forming government and tackling the country’s economic woes “with a great sense of responsibility and service toward this nation”.

He added that Italy must “heal its finances” and resume growth because today’s leaders owe it to future generations.

“Italy must again be and must be increasingly an element of strength, not weakness in a European Union that we helped found and in which we should be protagonists,” the 68-year-old economics professor told reporters.

He added that he would work “to get out quickly of a situation which has elements of an emergency but which Italy can overcome with a united effort”.

The former European Union competition commissioner received the formal mandate from President Giorgio Napolitano. He must now draw up a cabinet, lay out his priorities and see if he has enough support in parliament to govern effectively.

Monti is likely to pledge to carry out a program of reforms agreed with the ECB and the other euro zone countries, including raising the pension age, industrial relations changes and spending cuts designed to help bring Italy’s €1.9 trillion debt back under control.

His grip on power remains tenuous, however, and key opposition parties continue to call for fresh elections, which could plunge Italy back into two months of inertia.

Mr Berlusconi delayed his resignation on Saturday night, allowing Parliament to pass an austerity and reform package that includes some cuts to pensions and benefits, including raising the pension age for women from 60 to 65, and some tax increases. Italy has pledged to bring its budget from a deficit which is equal to 4 per cent of gross domestic product this year back into balance by 2013.

BERLUSCONI’S REIGN ENDS

Outside the presidential Quirinale Palace in Rome, where Mr Berlusconi went to tender his resignation on Saturday, a rowdy crowd gathered for a “Bye Bye Berlusconi” party.

Many jeered slogans such as “clown, clown”, and he was forced to leave the president’s residence by a side entrance. At the news of the resignation the crowd became better natured, although many shouted “jail, jail, jail”.

Meanwhile Mr Berlusconi’s television channels broadcast extended tributes and images of the rousing applause he received on his final appearance in the Parliament as prime minister.

Mr Berlusconi was forced to resign after he lost his parliamentary majority last week as his supporters defected and he lost the confidence of markets.

At the G20 summit in Cannes he suffered the humiliation of being told to accept an International Monetary Fund inspection team to provide independent monitoring of his economic policies.

The European Commission last week warned that the euro zone was at risk of recession because the doubts over Greek and Italian sovereign debt were destroying confidence across the whole euro zone economy.

The euro zone is expected to grow just 0.5 per cent next year.

GREEK PM PLEDGES FEBRUARY ELECTION

Mr Papademos has also pledged to implement an austerity package demanded by the euro zone and the IMF but he also sits atop a fissile coalition.

He has promised to rule only until February 19, when fresh elections will be called.

“The government’s main task is to implement the decisions, the conclusions of the October 26th and 27th euro zone summit meeting, and secondly to put into force the economic policies which come together with these decisions,” he said.

In the meantime, he has to complete negotiations with the euro zone, the ECB and the IMF to secure an €8 billion loan needed to avoid a default by the end of the year.

He must also negotiate a 50 per cent haircut for €100 billion of debt owned by private investors, which is one of the conditions set by the euro zone for extending the loans. Greek banks and pension funds own more than half this debt.

He said he would invite a the ECB, the IMF and the European Commission back to Athens. Talks were broken off after outgoing prime minister George Papandreou abortively decided to call a referendum on staying in the euro which French president Nicholas Sarkozy and German Chancellor Angela Merkel regarded as a breach of trust. Ms Merkel warned at the G20 summit in Cannes that Greece may have to leave the euro, the first time such a threat had been made explicit.

There was widespread resentment in both Italy and Greece that the financial markets and France and Germany had combined to overturn elected governments. Domenico Scilipoti, an Italian MP who will not support the new government, told the parliament, “A coup d’etat is taking place today and we have just had the last government elected by the Italian people”.

GREEK GOVERNMENT IN RACE AGAINST TIME

Papademos must begin implementing measures needed to secure the next instalment of an international loan as he takes charge of the debt-wracked nation this week.

The German and French leaders have said Athens has to ratify a bailout deal agreed at an EU summit last month before Greece can receive the €8 billion loan tranche needed by December 15 to avert default.

Papademos will be buoyed by poll numbers published on Sunday in the Kathimerini newspaper as he strives to restore stability to Greece’s turbulent political scene.

Fifty-five per cent of those polled said they had a positive opinion of the new prime minister, compared with 18 per cent who had a negative one and 27 per cent who did not have an opinion.

The new prime minister, who heads a majority socialist coalition that includes partners from both the right and far-right, is to speak in parliament on Monday ahead of a vote on Wednesday to confirm his new government.

Officials from Greece’s creditors - the EU, International Monetary Fund and European Central Bank - are due in Athens to evaluate progress to date in stabilising its finances.

In talks with Papademos on Saturday, Sarkozy and Merkel underlined the need for Greece to act quickly on the terms the 130-billion-euro bailout deal agreed at a Brussels summit on October 26-27.

“The payment of the next tranche [of the 2010 bailout] can only take place when a decisive step has been taken in this matter,” a statement from Sarkozy’s office said.

Under the terms of an international bailout deal agreed in October, private banks are to accept writedowns of 50 per cent, which will allow Greece to wipe out nearly a third of its 350 billion euro debt.

But Germany’s Der Spiegel magazine, in a report due out on Monday, said Berlin has worked out contingency plans in the event that Greece has to quit the eurozone if it fails to meet its obligations.

NO END IN SIGHT TO GREEK STRIKES

Greek Finance Minister Evangelos Venizelos, who kept his job in the new government, said the need to implement the measures agreed to in Brussels summit was “urgent” and would be done “no later than Monday or Tuesday”.

Papademos’s government must then force through the painful austerity measures exacted as the price for the second EU rescue package.

However, the strikes that started under Papandreou were set to continue as the main public service union, Adedy, called for three-hour stoppages, starting on Tuesday, in protest at rising taxes and 30,000 job cuts across the public service.

Demonstrations are also expected on Thursday, November 17, the anniversary of huge protests in 1973 by students at the Athens Polytechnic University against the then junta.

The government also faces continuing opposition from the KKE communist party and radical left party Syriza.

Both refused to join the new coalition, opposing what they termed Greek complicity with the IMF and the EU-led policy that obliges Greece to impose austerity measures.

The European Commission forecasts a 2.8 per cent contraction for the Greek economy in 2012 and a further increase in unemployment, measured at 18 per cent in August.

SPAIN’S RIGHT STORMS TOWARDS ELECTION WIN

Elsewhere in debt-stricken Europe, Spain’s right-leaning opposition is set thrash the ruling Socialists in November 20 elections, polls show, as anger over the country’s economic crisis spilled into the streets.

The conservative Popular Party, led by 56-year-old Mariano Rajoy, is set for a record parliamentary majority, surveys said.

The Socialists, whose standard bearer is 60-year-old Alfredo Perez Rubalcaba, faced their greatest defeat since Spain returned to democracy after the 1975 death of General Francisco Franco, the polls said.

Hundreds of Spain’s “indignant” protesters meanwhile poured into the streets of Madrid to protest spending cuts, high unemployment and political corruption, exactly a week before the general election.

An “indignant” protester demonstrate at the Puerta del Sol square in Madrid on November 13, 2011 against spending cuts, high unemployment and political corruption, a week before a general election.

Photo: AFP

“Change the Model Now!” declared a huge banner at the front of the march.

One group brought a cardboard guillotine they said should be used on corrupt or incompetent politicians.

Spain’s government is paying the price of an economy that stalled in the third quarter with zero growth and unemployment that soared to 21.52 per cent in the same period, the highest in the industrialised world.

In the only televised debate of the campaign, on November 7, Rubalcaba tried to skewer the Popular Party leader, accusing him of hiding plans to cut jobless benefits and financing for healthcare and education.

But Rajoy hammered the government’s economic and jobs record, arguing that the best way to protect social welfare was to create jobs and increase tax revenues.

A total 45.4 per cent of voters back the Popular Party compared to just 30.9 per cent for the Socialists, said a survey of 9675 people by Metroscopia published on Sunday in the centre-left newspaper El Pais.

That would the give the Popular Party 192-196 MPs, an absolute majority of the 350-seat lower house Congress of Deputies.

A poll by Sigma for rival centre-right newspaper El Mundo was even grimmer for the government, giving 47.6 per cent support to the Popular Party and 29.8 per cent to the Socialists.

Such a result would deliver 198 seats to the Popular Party.

If the surveys are proved right on election day, the Popular Party would smash its previous record win in 2000 when Jose Maria Aznar took 44.52 per cent of the electorate.

Adding to the humiliation, the surveys showed the right winning in the southern Andalusia region, a Socialist bastion for 30 years but among the hardest hit by the crisis.

Spain’s Socialists have been in power since 2004 under Prime Minister Jose Luis Rodriguez Zapatero, who has decided not to run again, and they now enjoy 169 seats in the lower house compared to 154 for the Popular Party.

BLAIR WARNS OF EURO COLLAPSE ‘CATASTROPHE’

Across the English channel, former British prime minister Tony Blair joined the growing chorus warning that the collapse of the euro would be “catastrophic” and calling for fast moves to support the currency.

Blair said European leaders faced “very difficult and painful” choices and a “long-term framework of credibility” was needed to see off the crisis.

Speaking following the resignation of Italy’s Silvio Berlusconi on Saturday, Blair said there had “never been a tougher time to be a leader than right now”.

In this handout image provided by the BBC, former British Prime Minister Tony Blair appears on the "Andrew Marr Show", warning that the euro must move fast to stave of a catastrophic collapse.

Photo: Getty Images

But he said the “whole weight” of European institutions - including the European Central Bank - must get behind the euro if it was to survive.

He told BBC TV on Sunday that economies had to align and that “the myth that the Italian and German economies were the same - that 10-year myth has now evaporated”.

Measures required to bring stability to the euro would be painful, he warned, but added: “If the single currency broke up, it would be catastrophic.”

Blair, who was prime minister for a decade until 2007, was also asked if his former finance minister, Gordon Brown, had been right to push hard for Britain to stay out of the euro when Labour was in power.

“He was right, although I would also say by the way, I was never in favour of doing it unless the economics were right,” Blair replied.

British Prime Minister David Cameron will meet Germany’s Angela Merkel in Berlin on Friday for talks on the euro’s difficulties and the economy.

Cameron said on Friday there was still “a big question mark” over the future of the eurozone and stressed it was not in Britain’s interests for the single currency to break up but the government is “preparing for every eventuality”.